The Fair Pay Agreements Working Group report contains some horribly familiar concepts which remind me strongly of the days before the 1991 introduction of the Employment Contracts Act and its 2000 successor the Employment Relations Act. It is supremely ironical the chair of the Working Group, Sir Jim Bolger, was Prime Minister, previously Minister of Labour, at the time the ECA was passed into law.
The Great Helmsman, as he was nicknamed, has shown great flexibility throughout his career, having initiated the referendum on MMP, served as Ambassador to the United States and been appointed by Labour to chair several SOEs and working groups. The outcome of his latest role suggests a well-deserved retirement may be overdue.
Analysis of the Fair Pay Agreements recommendations indicate any industry is at risk of being required to participate, provided 10% of the workforce or 1,000 workers in that industry vote in favour of negotiations, with the employers having no choice in the matter. The purpose of FPA legislation would be to lift the wages of workers in low paid sectors, most of which are likely to be either local or national public service, but it does not require much imagination to see a similar situation arising in the private sector to the detriment of industry competitiveness.
The proposed introduction of FPA appears to be ideologically, not practically driven, as a gesture of solidarity by a Labour government towards the union movement which still retains a strong element of control over the party. In coalition with New Zealand First before last year’s Election, there was no chance the government could bring in FPA, so the new Minister of Employment Relations, Michael Wood, has seized the opportunity of a large majority to work towards putting a bill before Parliament by the end of 2021.
BusinessNZ was represented on the working group, but has since withdrawn its support for the final report, stating it contains several elements of concern, notably the return to pre 1991 award systems which impose compulsory outcomes on both parties and the focus on equality at the expense of productivity and efficiency.
While some of the more draconian provisions of the ECA were modified by the ERA, there will be no private sector businesses that would support the backward move to the bad old days when strikes were frequent and companies were forced to close for days or weeks at a time, before the parties reached a grudging agreement. The meat processing industry is a prime example of one in which systemic inefficiency had been preserved by a combination of farm subsidies, union power and ageing infrastructure.
Meat works occupied huge areas of land, housing slaughter chains designed to process on single shifts more livestock than was profitably available, with minimal further processing facilities and too much freezer capacity. Great Britain’s entry into the Common Market which led ultimately to the removal of subsidies by the 1985 Labour Government was the trigger for a major reduction of livestock, rampant procurement competition, capacity closure, workforce layoffs and company receiverships and takeovers.
The ECA and its successor ERA have made possible what was painful, but inevitable. The meat industry which has evolved over the last quarter of a century could never have arrived where it is today, if unions had retained their previous powers under the law. The industry employs a workforce of 25,000 in a wide variety of jobs, including slaughtermen, boners, butchers and cold store operators. Many of these are covered by collective agreements, negotiated with their union representatives, while others are employed on individual contracts. All of these agreements pay above the minimum wage and provide fair terms of employment. Meat Industry Association CEO, Sirma Karapeeva, says FPAs would be totally unsuited to meat processing which is spread across the whole country under a variety of different union or individual agreements covering a wide range of jobs. She sees this as tilting the field in favour of unions, as well as being about centralisation of control.
Earlier this month the New Zealand Initiative stated there is no evidence New Zealand’s employment settings or wage rates would benefit from the “flawed FPA recommendations” of the Working Group, but on the contrary average wages are increasing faster than inflation across all deciles and are not being bid down by employers. The only beneficiaries of implementing FPAs would be the unions.
BusinessNZ has produced a commentary in response to the Working Group’s report which offers a series of alternatives to the recommendations with two overarching principles: firstly, participation is voluntary and secondly, FPAs are industry/sector/occupational Codes of Practice that become binding on parties that sign it, like Collective Agreements. The alternative approach proposed is less prescriptive than the Working Group report, but provides guidance to the participants on the clauses that would be binding and who would be bound by them.
Apart from the obvious conclusion about paying its dues to the union movement, it is hard to see what the government hopes to achieve from introducing FPA legislation. The stated reason of reducing inequality does not appear to stack up against the disadvantages of reduced productivity and efficiency, especially when a relatively small range of mainly public sector occupations is involved.
The government would be better occupied in building bridges rather than hijacking private sector employers, particularly agricultural businesses which consistently demonstrates their value to New Zealand’s current and future prosperity.
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